German businesses see confidence rise further despite nerves over expectations

Jasper Jolly
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Germany's economy is the largest in Europe (Source: Getty)

Confidence in the German economy increased further in April according to a closely watched survey, signalling continued momentum in the Eurozone’s largest economy.

Business sentiment climbed further to build on its highest level since July 2011, according to the IFO Business Climate Index.

The reading increased from 112.4 in March to reach 112.9, above economists’ expectations.

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German firms’ assessment of the current business climate also climbed further to reach the highest level since 2011, before the Eurozone debt crisis sent shockwaves throughout the European economy.

However, businesses’ expectations for future growth moderated slightly, although remaining at relatively high levels.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “This divergence, if sustained, would not be a good signal for the cyclical momentum in Germany. Overall though, the survey points to brisk GDP growth in the near term.”

The German economy, by far the largest in the Eurozone, has seen a healthy recovery in leading indicators in recent months.

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The composite purchasing managers’ index (PMI), which measures expansion in the economy, saw the pace of growth sustain high levels, despite slowing from near six-year highs.

Unemployment remains at its lowest level since December 1980, at 3.9 per cent, while inflation retreated to an annual rate of 1.6 per cent in March.

Timo Klein, principal German economist, IHS Markit, said: “Overall, April’s Ifo business climate report was better than expected and clear evidence of increasing momentum in the German economy.

“It corroborates a similar message to that conveyed by rising German manufacturing PMI data since last September. Manufacturing sector exports are apparently benefiting from brighter global demand prospects and the weaker euro, and construction and retail trade are also now rebounding from recent setbacks.”

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